Dubai: Job losses leading to higher vacancy rates continue to have a telling effect on Abu Dhabi’s residential space, and more so at the top end of the rental spectrum.
Over the last 12 months, apartment rents are down by a fairly significant 10 per cent, including by about 3 per cent in the second quarter, says the latest market update from JLL.
Given the predominance of high-end homes within Abu Dhabi’s existing residential base, the changes in rentals are reflected more in this category than in mid- to lower end.
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And it could be a while before new mid-market homes come to the market, notably The Bridges from Aldar. Of the six mid-rise buildings (each with 212 units), the master-developer is retaining three for leasing purposes and has offered the other three as freehold.
Deliveries are scheduled for early 2020. For the moment though, Abu Dhabi’s residential market is seeing a “combination of increased living costs, cuts in housing allowances and less certainty in the job market,” the JLL report states.
This has led “some residents to downsize to smaller and cheaper units [and] vacancy rates will therefore continue to place downward pressure on residential rents.”
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And it might mean developers who don’t have the deep pockets need to pace their projects — current and to be launched — accordingly. Apart from the demand pulled in for The Bridges, investors have not been rushing to acquire off-plan units in Abu Dhabi.
In fact, demand for premium residential real estate took a 3 per cent decline in the second quarter (and 11 per cent over the last 12 months), JLL says.
During the three months from April, around 900 units were handed over and which brought the emirate’s total housing stock to about 250,000 units. Among the significant handovers included the Sigma Towers on Al Reem Island and Bloom Gardens’ Phase 3 on Al Salam Street.
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In an ideal situation, 4,000 new homes were to be delivered through this year. But the current realities suggest the market should see a “significant proportion” of the intended supply getting delayed at the “final stages of approval and handover”.
That from a developer’s perspective means less chances of a market awash in unsold inventory, while for the landlord it reduces the risk of heaving to lease when rents are under extreme duress.
From a market perspective, it helped that the second quarter did not see any major new office properties being ready. But 170,000 square metres of new stock is scheduled for completion this year, including the headquarters of ADIB on Airport Road and the Leaf and Omega towers on Reem Island.
“Job losses continue, with Abu Dhabi banks cutting over 900 jobs in the past 12 months according to the Statistics Centre of Abu Dhabi,” JLL notes. “Abu Dhabi firms are hiring fewer employees, with online recruitment activity declining 47 per cent in the year to March (compared to the same period last year) according to the Monster Employment Index.
“Requirements for additional office space are expected to remain limited throughout 2017, due to the reduction in government spending. However, supply remains under control, and Grade A vacancy remains relatively low, offsetting the negative impact of reduced demand.”
